Woongjin Group and its creditors have reached an agreement to launch the sale process of Woongjin Chemical next year as a method to improve the group’s financial soundness, bank officials said Monday.

Woongjin Chemical’s parent Woongjin Holdings has been placed under court receivership over the past few months due to its financial woes involving heavy debt.

“The group, which was instructed by the court to scale down unhealthy assets in consultation with its creditor banks, has no choice but to seek the sale of some subsidiaries to avoid facing liquidation of the overall businesses,” said a bank executive.

He said that talks are under way to decide on potential buyers, the sell-off schedule, offering price and other details. Woongjin Holdings plans to buy 214.64 million shares in Woongjin Chemical held by another affiliate Woongjin Coway early next year as planned.

Earlier, Woongjin Holdings and the creditors decided to sell its 30.9 percent stake in Woongjin Coway Co., a leading water purifier maker, to MBK Partners Ltd., a local private equity fund, for 1.2 trillion won ($1.14 billion).

MBK Partners is poised to pay 360 billion won, or 30 percent of the stake value, to Woongjin Holdings on Dec. 28 and the remainder in January.

Industry sources said the proposed sale of Woogjin Chemical is expected to help improve the financial difficulties Woognjin Holdings are experiencing.

The holding company has been placed under court receivership due to financial difficulties since September.

Furthermore, the conglomerate was under public criticism for a breach of ethics after the holding company and the construction unit filed for court protection.

A day before its application for the court receivership, Woongjin Holdings was found to have paid back 53 billion won of debt it borrowed from Woongjin subsidiaries. The company repaid 25 billion won and 28 billion won, respectively, to Woongjin Thinkbig and Woongjin Energy two days before the due date, in an apparent move to prevent damage to its business units as the repayment would be impossible under court control.

The group’s debt-saddled arm Kukdong Construction also transferred its 100 percent stake in Ocean Suites Jeju Hotel to Woongjin Food for 3.4 billion won the day before filing for court receivership. The hotel is considered a cash cow for its high occupancy rate of 82 percent over the year.

In October, Woongjin Group chairman Yoon Seok-geum apologized for his mismanagement of the companies and resigned as CEO of Woongjin Holdings.

By Kim Yon-se (kys@heraldcorp.com)